Research output: Working paper
Research output: Working paper
}
TY - UNPB
T1 - A Least Squares Regression Realised Covariation Estimation
AU - Nolte, Ingmar
AU - Vasios, Michalis
AU - Voev, Valeri
AU - Xu, Qi
PY - 2019/10/3
Y1 - 2019/10/3
N2 - We propose a least squares regression framework for the estimation of the realized covariation matrix using high frequency data. The new estimator is robust to market microstructure noise (MMS) and non-synchronous trading. Comprehensive simulation and empirical analysis show that our estimator performs as well as a set of popular estimators in the literature. More importantly, our framework allows for the unique identification of MMS noise moments. We find that these noise moments are related to measures of liquidity and contain predictive information that helps to significantly improve out-of-sample asset allocation.
AB - We propose a least squares regression framework for the estimation of the realized covariation matrix using high frequency data. The new estimator is robust to market microstructure noise (MMS) and non-synchronous trading. Comprehensive simulation and empirical analysis show that our estimator performs as well as a set of popular estimators in the literature. More importantly, our framework allows for the unique identification of MMS noise moments. We find that these noise moments are related to measures of liquidity and contain predictive information that helps to significantly improve out-of-sample asset allocation.
U2 - 10.2139/ssrn.2205033
DO - 10.2139/ssrn.2205033
M3 - Working paper
BT - A Least Squares Regression Realised Covariation Estimation
PB - SSRN Working Paper
ER -